A) Personal Responsibility or Financial Meltdown?
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Personal Meltdown and Fiscal Irresponsibility of the Borrower Disguised as Social Doctrine
One Historical Account of the Politization of the Personal Relation: Stanley Kurtz:
CRA was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. That has provided an opening to radical groups like ACORN (the Association of Community Organizations for Reform Now) to abuse the law by forcing banks to make hundreds of millions of dollars in "subprime" loans to often uncreditworthy poor and minority customers.
In fact, intimidation tactics, public charges of racism and threats to use CRA to block business expansion have enabled ACORN to extract hundreds of millions of dollars in loans and contributions from America's financial institutions.
In February 1990, Illinois regulators held what was believed to be the first-ever state hearing to consider blocking a thrift merger for lack of compliance with CRA. The challenge was filed by ACORN… Officials of Bell Federal Savings and Loan Association, (…), complained that ACORN pressure was undermining its ability to meet strict financial requirements it was obligated to uphold and protested being boxed into an "affirmative-action lending policy."( …)
Well, the pilot program "worked," and Fannie Mae's message that risky loans to minorities were "OK" was sent. The rest is financial-meltdown history. “
If the realist anthropology of the human person as subject is to be in relation, then the entire process has broken the personalization process that must obtain in an anthropology of work where work is an action whereby the person makes a gift of himself. Money is symbolic representation of the person’s work. If the relationship (represented by money) between the parties is reified by money that does not represent the relationship but is merely a “thing” that can be broken into pieces and owned by many as “their own,” then the “meltdown” is of the human itself, and not merely “the financial history.”
1) Work is the result of being made in God’s image. It consists in subduing the self as part of the earth in order to subdue the earth and name the animals. By so doing, material creation is raised to the level of relationality: “All things are yours, and you are Christ’s, and Christ is God’s” (1 Cor. 3, 23). You must master yourself, so that you can own yourself since private property comes from the work of mastering and subduing. Having subdued yourself, you are then free to subdue the earth and make it your own private property. But that process of subduing and owning is the condition of making the gift of yourself as image of a Trinity of three Person each of Whom is a relation to the Others. To be in relation is to be in a state of imaging God. This can only take place when there is ownership of self and earth to make a gift of it. All work takes on this meaning
Be Not Afraid
Because of the materialization of reason which dumbs-down economics from a human ethic to a positivist technology, the “Cure for Greed,” as presented in the New York Times (9/29/08, A 20), is “fear.” In a secularized culture dominated by material security and money, salvation comes from fear. In the editorial “Notebook from yesterday's editorial page, The Times writes: “Yet despite the consistent failure to temper our greedy nature, I still have hopes. Because there is a crucial brake that has been missing from the edifice of high-tech financial capitalism – a counterbalance at the other end of the scale from where utility gets maximized. That piece is fear. My suggestion, then, is to put fear back in the picture. When the banker who loses his or her bank also loses his or her shirt, greed will be tempered. At least for a while” (emphasis mine).
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I was roundly dismissed as an economic ignoramus by Larry Cudlow in a talk given in the 90’s. In terms of economic expertise, Larry was indeed correct, and continues to be so. However, my point was not economics as a positive science but as a human act and therefore subject to moral scrutiny.
That said, the occasion for undermining my moral authority was the reference I made to Joseph Ratzinger’s paper “Market Economy and Ethics” (posted yesterday). Larry immediately leaped on the reference Ratzinger made to Adam Smith Smith’s laissez-faire economy that champions self-interest, the division of labor, the function of markets, “the invisible hand” of divine Providence, etc. and groused about Ratzinger’s insistence that economics needed internal regulation by a moral dimension.
Ratzinger offered that Smith’s “position holds that the market is incompatible with ethics because voluntary ‘moral’ actions contradict market rules and drive the moralizing entrepreneur out of the game. For a long time, then, business ethics rang like hollow metal because the economy was held to work on efficiency and not on morality.4 The market's inner logic should free us precisely from the necessity of having to depend on the morality of its participants. The true play of market laws best guarantees progress and even distributive justice. “His basic critique of this is the presence of a concealed “determinism.” He wrote: “The great successes of this theory concealed its limitations for a long time. But now in a changed situation, its tacit philosophical presuppositions and thus its problems become clearer. Although this position admits the freedom of individual businessmen, and to that extent can be called liberal, it is in fact deterministic [my underline] in this core. It presupposes that the free play of market forces can operate in one direction only, given the constitution of man and the world, namely, toward the self-regulation of supply and demand, and toward economic efficienty and progress.” He goes on: “This determinism, in which man is completely controlled by the binding laws of the market while believing he acts in freedom from them, includes yet another and perhaps even more astounding presupposition, namely, that the natural laws of the market are in essence good (if I may be permitted so to speak) and necessarily work for the good, whatever may be true of the morality of individuals. These two presuppositions are not entirely false, [because they contain the profound truth of the free self-determination of the person as imaging God], as the successes of the market economy illustrate. But neither are they universally applicable and correct, as is evident in the problems of today’s world economy. [This was delivered in 1985, some four years before the economic and political collapse of the Soviet Union].
He then proposes the thesis that is enunciated in the mouth of Peter Koslowski that brought the scorn of Cudlow on me: “’The economy is governed not only by economic laws, but is also determined by men…’ Even if the market economy does rest on the ordering of the individual within a determinate network of rules, it cannot make man superfluous or exclude his moral freedom from the world of economics. It is becoming ever so clear that the development of the world economy has also to do with the development of the world community and with the universal family of man, and that the development of the spiritual powers of mankind is essential in the development of the world community. These spiritual powers are themselves a factor in the economy: the market rules function only when a moral consensus exists and sustains them.”
Ratzinger then turns to consider “the tensions between a purely liberal model of the economy and ethical considerations.” He says that “the inherent inequality of various individual economic zones [not only within a national economy but also between hemispheric economies such as North and South] endangers the free play of the market, attempts at restoring the balance have been made since the 1950s by means of development projects. It can no longer be overlooked that these attempts have failed and have even intensified the existing inequality. The result is that abroad sectors of the Third Word, which at first looked forward to development aid with great hopes, now identify the ground of their misery in the market economy, which they see as a system of exploitations, as institutionalized sin and injustice. For them, the centralized economy appears to be the moral alternative, toward which one turns with directly religious fervor…”
Ratzinger then goes to his point: “For while the market economy rests on the beneficial effect of egoism and its automatic limitation through competing egoisms, the thought of just control seems to predominate in the a centralized economy, where the goal is equal rights for all and proportionate distribution of goods to all.”
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Is this not uncannily close to the situation we are in at this critical moment in the United States. In 1977, the Community Reinvestment Act was passed into law. It was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. Affirmative action put pressure on the banks to make the loans and increased the pressure by making expansion and mergers with other banks difficult by accusing them of racism. When these loans were not repaid, Fannie May stepped in and began buying the bad loans and offering them for sale on world markets. Fannie and Freddie acted in response to Clinton administration pressure to boost home ownership rates among minorities and the poor.
This is the critical point of the crisis. It is not the bailout of the entire financial system, and the mechanics of it. The critical point is the assumption that the entire problem is merely economic as a positivistic determinism a la Adam Smith.
Is there a moral value involved in lending money to a person - who we know will not be able to repay the gift -, provided we will be bailed out for the money by a third anonymous source, and without solution to the person now left in deep debt and exacerbated penury. Isn’t there a comparison to Ratzinger’s reference to the “Third World, which at first looked forward to development and with great hopes, (which) now identifies the ground of its misery in the market economy, which it sees as a system of exploitations, as institutionalized sin and injustice.”
Notice that the Wall Street Journal now assumes that the root of the problem is not the positivist mechanics of the economic system as proclaimed by Adam Smith, but greed. The Journal wrote on September 22, 2008:
Work as Self-Gift, Not Commodity (“Thing”)
Yes! It is work. Only persons work. Animals do not work. Machines do not work. They “function.” Only persons work in a communion of persons where there is gift exchange. Ultimately, the value of the work is the presence of the "I" of the worker in the object “made.” Hence, there is an objective value of work, and a subjective value. The objective value is the work itself as a commodity that is exchanged. But if that work is the result of the gift of the "I"of the worker, which transforms it into a given-self (and therefore of excellent quality: the best possible in the creative process), then that work as gift must be returned to the giver in some form. It cannot be kept selfishly. It must keep moving.
“Whatever we gave been given is supposed to be given away again, not kept. Or, if it is kept, something of similar value should move on in its stead, the way a billiard ball may stop when it sends another scurrying across the felt, its momentum transferred. You may keep your Christmas present, but it ceases to be a gift in the true sense unless you have given something else away. As it is passed along, the gift may be given back to the original donor, but this is not essential. In fact, it is better if the gift is not returned but is given instead to some new, third party. The only essential is this: the gift must always move. There are other forms of property that stand still, that mark a boundary or resist momentum, but the gift keeps going.”
 The New York Post, September 29, 2008, 5.
 John Paul II, “Laborem Exercens,” #6.
 John Paul II, Laborem Exercens #14.
 Eduardo Porter, “A Cure for Greed” NYT 9/29/08 A 20.
 J. Ratzinger “Market Economy and Ethics,” Symposium: “Church and Economy in Dialogue” (1985); published in Communio 13 (Fall 1986) 199-204.
 Lewis Hyde, “The Gift” Vintage (1983) 4.